* This paper starts from the observation that the
internationalisation process (IP) model frequently is interpreted as a
model of risk reduction in the internationalization of the firm. The
dominating view of the model seems to be that commitment is the
dependent variable and experience is the independent variable. A basic
assumption of the original model, however, is that opportunity
development is an important outcome of commitment. The purpose of this
note is to articulate this relation, which is not stressed enough in
earlier writings.

Key Results

* A causal chain from relationship commitment over relationship
knowledge development and network knowledge development to opportunity
development is specified. Two propositions are formulated regarding the
effects of mutual relationship commitment and of network embeddedness in
a country market on opportunity development in the market.

Introduction

25 years afterwards, we are surprised. Firstly, we never expected
this longevity of the model. Secondly, we are surprised, because after
some thinking we have arrived at the conclusion, that we would not have
built the model differently today, but with somewhat different
underpinning. In a way we were lucky in using concepts such as
"knowledge" and "commitment", which later came to be
widely used in research on the theory of the firm but also in some
functional disciplines. We were left with our inductively produced
understanding of these concepts. We are grateful to the organizers of
the conference and editors of this issue of MIR for focusing on the IP
model and giving us this opportunity to elaborate on it.

But, we must point out that the model is not "the
establishment chain", going from ad hoc exports to the
establishment of manufacturing subsidiaries. This was the empirical
phenomenon we observed, giving the impetus to construct the model. The
model is on learning and commitment building or, more precisely, on the
interplay between knowledge development and increasing foreign market
commitments. While the effect of knowledge development on foreign market
commitment has been recognized and studied by many researchers the
effect of commitment on knowledge development has been less noticed. The
purpose of this note is to elaborate on this latter effect. In
particular, we are here interested in the effect on opportunity
development.

Admittedly, this note is written in a way that it presupposes the
reader is familiar with the original version of the internationalization
model published in 1977 (Johanson/Vahlne 1977). In that article we tried
to explain the gradual internationalization process observed by relying
on two interdependent sub-processes--experiential learning and
commitment building. We related those processes to the focal company
only, later realizing that indeed these processes occur as interplay
between at least two (potential) partners (Johanson and Vahlne 1990). In
Johanson/Vahlne (2003), we tied the mechanisms of our original model
closer to the network view of industrial markets by focusing on the
critical role of building and changing relationships. One implication is
that the concept of a "country market" is no longer seen as a
valid unit of analysis. In this note, we focus on network or partner
commitment and its role not only for uncertainty reduction, but on a
sub-set of issues, notably--opportunity development. We believe we have
under-estimated this aspect and the purpose of this note is to make up
for that.

The paper is structured as follows. After a short introductory
review of important applications of the IP model in international
business research, we discuss the change from market commitment to
relationship commitment. In a following section, we discuss the
relations between relationship commitment and knowledge development.
Next, we widen the discussion to include network relationships, social
capital and knowledge development. In the subsequent section, we return
to the central question of the paper, the effect of commitment on
opportunity development. This section is summarized in two propositions.
Finally, we give some concluding comments.

Some Comments on Literature Based on the IP Model

The model is mostly characterized as a learning model of the
internationalization process (Forsgren 2002), in which experience is the
main explanatory construct (Blomstermo/Sharma 2003). Interestingly,
however, most studies referring to the IP model do not study
experiential learning, but take it for granted and see knowledge--or, as
suggested by the model, experiential knowledge--as the independent
variable, and commitment--or, in some articles, performance--as the
dependent variable. They usually operationalize experiential knowledge by number of years (Luo/Peng 1999) or number of countries (Erramilli
1991). A number of studies have used various forms of experience to
explain why firms enter foreign countries, invest in foreign countries
or are more or less successful abroad. Foreign experience (Hohenthal
2001), international operations experience (Yu 1990), international
experience (Delios/Beamish 1999), entry experience (Chang 1995),
decision specific experience (Padmanabhan/Cho 1999) and other types of
experience have been used in explanations of various types of
internationalization behavior. Studies of performance and survival in
internationalization process seem to view it as a test of the
effectiveness of experiential learning (Barkema/Bell/Pennings 1996, Luo
1999).

With the exception of Hadjikhani (1997) studies of commitment as
explanation of internationalization are absent. Nor has, to our
knowledge, anything been written explicitly about the interplay between
knowledge development and commitment.

Moreover, experiential knowledge is generally assumed to be
important because it reduces uncertainty associated with the foreign
market commitments (Buckley/ Ghauri 1994). Although this is an important
role of experiential knowledge in the model, we also stressed that it
"provides the framework for perceiving and formulating
opportunities" (Johanson/Vahlne 1977, p. 28). Admittedly, the
opportunity side of the internationalization process is not very well
developed in our earlier papers. We had a feeling that it was important
as demonstrated by the sentence "The reason for considering market
commitment is that we assume that the commitment to a market affects the
firm's perceived opportunities and risk" (ibid., p. 27) but we
had no conceptual tools for developing it. Later on, a number of such
tools have become available and in this little note the aim is to
develop the causal line from commitment over experiential knowledge to
opportunity development.

From Market Commitment to Relationship Commitment

An important change of the model was introduced in Johanson and
Vahlne (1990) and developed further in Johanson and Vahlne (2003), which
discuss business relationship learning and commitment in the
internationalization process. The original version focused on the focal
firm only. Later we realized that similar processes went on also at the
other end of the relationships constituting the business world. The
following discussion is based on this idea. In short, our reasoning is
as follows. When a focal firm and another firm are mutually committed to
future business with each other, they have a basis not only for learning
about and from each other, but also for creating new knowledge through
interaction. In this way, they develop opportunities for new business.
Moreover, if the partner firm also is committed to other relationships,
the focal firm becomes indirectly linked to a wider network of
interconnected firms, who are committed to each other and, to some
extent, have a shared knowledge capital. In this way, the relationship
provides a bridge into a new knowledge world and the opportunities
created in the relationship have a wider significance than just business
with the partner firm. The critical issue is that building the
relationship is a costly, time-consuming and uncertain process. We
believe that this, in addition to other reasons discussed in the earlier
IP writings, is one important reason why it takes time to
internationalize with high long-term performance.

The internationalization process suggested by this reasoning is, on
the surface, the same as the internationalization process, in which the
main role of experiential knowledge is uncertainty reduction. But while
uncertainty reduction puts a check on the process, the proposed
mechanism drives it. It identifies and develops hitherto unimagined
business opportunities with strong long-term implications for the
development of the firm. Below we comment on the mechanisms of the
model.

Relationship Commitment and Knowledge Development

It is an established fact that companies form relationships with
other companies. Such relationships are in many cases lasting long,
sometimes for decades and a major part of the business exchange is often
carried out in such relationships. Exchange performed in such
relationships seems to improve on the efficiency of the partners
involved (Hakansson 1982, Ford 2002), thanks to joint co-ordination. The
general explanation to this phenomenon is that resources, and
organisations, are not homogeneous but rather heterogeneous, and
consequently one partner fits better than another. Still more,
heterogeneity means that the partners always can find new ways of
relating to each other so that they gradually, adjust to each other and
gradually become more interdependent (Anderson/Hakansson/Johanson 1994).
In this paper, we are primarily focusing on the relationship between two
partners. It is, however, important to realize that the two focal
companies have more relationships, perhaps partially over-lapping, as to
form a network of such relationships involving numerous more or less
critical actors. Thus, through its relationships with other firms, the
firm is engaged in a wider network of relationships. A particular
relationship cannot be fully understood in isolation. It should be
considered in the context of the connected network relationships.

Relationships may start as the result of ad hoc events, e.g.
unplanned meetings. Or they can start as a result of systematic search
for a partner, for example a supplier. A successful first deal,
performed as an arm's length transaction, may lead to more business
between the two companies and this can be the start of a process whereby
the two companies find themselves in a relationship. The relationship is
continued and deepened as long as both partners benefit from it.

A relationship between two companies is therefore characterized by
exchange, involving for example material products, services and
information. Furthermore a relationship implies mutual existence of
interdependence, trust and knowledge about each other in many
dimensions, such as capabilities, needs and routines. Mutual commitment
by the partners to future business with each other can be said to be the
basic characteristic of business relationships
(Blankenburg/Eriksson/Johanson 1999). But building relationships is not
without its problems. Similarly, Anderson and Weitz (1992) examined how
the partners through interactive pledges build and sustain commitments
to their relationships. According to an unpublished analysis of the
relationship data from the IMP project it took on average five years of
investment through interactive adaptations to build a relationship
characterized by mutual commitment. But relationship building is not
always successful. Hohenthal (2001) conducted a case study of the
creation of new business relationships that were expected to become an
important part of the firms' future business. Three years after
initiation seven of the ten prospective new business relationships were
terminated and three were still expected to become successful.

Being a partner in a relationship can be regarded as an asset. A
well functioning relationship is a result of investments. Having an
asset implies having an advantage. But there is also the disadvantage of
being dependent. There will be switching costs and inertia connected
with breaking up a relationship. And the fact, that the focal
relationship is only one of many of a network of relationships, implies
that there are "rings on the water" from relationship change
(Cook/Emerson 1978).

Relationships have many dimensions: technical, legal, economical
but also human. The latter is critical as people learn and build the
social construction the relationship essentially is, even if there are
also material dimensions. Consequently, how a relationship develops
depends on the people involved. Obviously, there are processes of
learning and trust building involved.

Hakansson (1989) and Hakansson and Eriksson (1994) found that
customer-supplier relationships are conducive to product development
efforts arguing that efficiency as well as innovation are, to a large
extent created through synchronization, which is "the
confrontation, combination, interlocking and integration of the
activities and resources of different actors". Von Hippel (1988)
has reported similar findings.

Another example is described in Dahlqvist (1998). A supplier, who
is offered an idea for improving of a component to be used by a
customer, finds the idea "absurd". However, the customer
managed to get the supplier interested and in a process, such as the one
described above, an innovation was finally launched. The process implied
drastic re-thinking and development of shared meaning.

The above reported findings are made in studies of vertical
relationships, where it is relatively easy to imagine that an
opportunity to improve is of interest to both partners can be
identified. Hamel (1991) has studied learning within strategic
alliances, from formal joint ventures to agreements to cooperate, where
the competitive aspect is present. According to these findings the
original intent of the partners is important. In some cases this was an
explicit intent while in others not. Learning occurred in the former and
not at all in the latter. Attitudes are important. Openness for the
previously unknown was found critical. The competitive aspect is
pronounced. It seems that the dominating view is to learn from an actual
or potential competitor, while limiting the partner's access to own
knowledge. "Creating new knowledge" did not appear to exist on
the agenda, in our interpretation of the findings. The phenomenon of
cooperating to gain new knowledge seems to have become widespread.

An important part of the interaction in a relationship concerns
learning about each other, but more so to identify opportunities for
improving on the business of the two partners, that is to create new
knowledge (Dahlqvist 1998).

Some knowledge is easy to acquire. It can be learned by reading
written material produced by the partner-objective knowledge. Some
knowledge can only be learned from doing-experiential knowledge (Penrose
1959). Such knowledge could concern for example knowledge of uncodified
routines at the partner's organization. Such routines can be tacit
(Polyani 1967). As these are not made explicit they can only be learned
about in an experiential fashion and perhaps stay as tacit also with the
partner. To make experiences takes time.

Obviously, organizational routines may be seen as manifestations of
knowledge shared by the members of that organization. This
"collective" knowledge may be either explicit or tacit. Such
knowledge is "fundamentally embedded in the forms of social and
institutional practise that reside in the tacit experiences and
enactment of the collective" (Brown/Duguid 1991).

However, this latter view of knowledge and learning implies that
the knowledge does exist and can be found. And of course, such knowledge
and learning is important and necessary as a prerequisite for
"learning with partner" (Dahlqvist 1998). As the two partners
can be assumed to be interested in improving on the efficiency and
effectiveness of their joint activities, they can be expected to build
new knowledge. The processes of learning and creating are intertwined.
Such knowledge can be seen as socially constructed (Berger/Luckmann
1966).

Network Relationships, Social Capital and Knowledge Development

Nahapiet and Ghoshal (1998) add to our insights into the process of
creation of new knowledge and assumptions conducive to the progress of
that process. Their focus is the importance of social capital in
building intellectual capital, with aim of contributing to the
"Theory of the Firm" and the formation of firm-specific
advantage rather than the exploitation of such advantages, which has
been the main occupation among theorists. Although, the paper takes the
individual company as the unit of analysis, the company is clearly seen
as consisting of a number of sub-units and individuals. The firm is
regarded as a network and there are no difficulties in applying their
findings on inter-firm relationships and networks.

Social capital can be seen as "networks of strong,
crosscutting personal relationships developed over time that provides
the basis for trust, cooperation, and collective action ..."
(Jacobs 1965 as cited by Nahapiet/Ghoshal 1998). This is developed
through a history of interactions (Granovetter 1992). Emotional aspects
are important and Fukuyama (1995) stresses trust and trustworthiness as
ingredients of a unit benefiting from social capital. There is also a
"cognitive dimension" such as "shared representations,
interpretations, and systems of meaning among parties" (Cicourel
1973) to the social capital. Other important cognitive aspects are
shared language and narratives. Interestingly, these are assets shared
by the partners and cannot be exploited individually.

As we see it, the concept of social capital as used by Nahapiet and
Ghoshal has a lot in common with the concept of commitment in ours and
in Morgan and Hunt's (1994) definitions. The difference might be
that commitment includes an explicit willingness to act as to maintain
or develop the relationship (Morgan/Hunt 1994). It may, however, be
implicit in Nahapiet's and Ghoshal's social capital, as they
claim, with supporting references, that social capital encourages
cooperative behaviour. We use the concepts of social capital and mutual
commitments interchangeably.

Access to social capital provides advantages to the extent that
mutual trust and shared meaning decrease uncertainty and improves the
effectiveness of joint undertakings. It furthermore has a positive
impact on adaptive efficiency, creativity, learning and cooperative
behaviour (Nahapiet/Ghoshal 1998). Within the cooperative behaviour,
though, different views have to be negotiated and can to that extent be
described as an "incremental trouble shooting process"
(Malmberg/Solvell/Zander 1996).

New knowledge, new intellectual capital, is created through two
generic processes: combination and exchange. The former refers to pieces
of knowledge from different areas of knowledge being combined to form
new knowledge. The latter, including combinative elements, stresses the
fact that interaction, teamwork, in the creation of new knowledge.
"... develops an increasing knowledge of the possibilities for
action and the ways in which action can be taken ..." (Penrose
1959). This points to the discovery of opportunities, perhaps created
jointly by two partners in a relationship. Such knowledge is socially
constructed.

For this to happen, certain conditions must be met
(Nahapiet/Ghoshal 1998). There must be an opportunity to combine or
cooperate. That is, the existing body of knowledge--explicit or
tacit--must create scope for opportunities. Receptivity and motivation
are other such conditions. Finally, previous knowledge has an important
impact on the process. The absorptive capacity is strongly related to
"the existence of related prior knowledge" (Cohen and
Levinthal 1990). This may be part of the explanation why there seems to
be much path dependence in business behaviour (Johanson/Vahlne 1977,
Zander 1994).

There are reasons to believe that the processes of developing
social capital and knowledge (intellectual capital) evolve in a parallel
fashion thereby strengthening each other (Fukuyama 1995). Referring to
Bourdieu (1986), Nahapiet and Ghoshal (1998) state: "Social capital
resides in relationships, and relationships are created through
exchange". In effect cooperation breeds trust and trust breeds
cooperation. And the same source citing Fairtlough (1994): "People
in the two companies could rely on each other. This was cooperation,
which certainly went beyond contractual obligations. It might also go
beyond enlightened self interest, and beyond good professional
behaviour, because the scientists liked working together, felt committed
to the overall project and felt a personal obligation to help the others
involved". It has also been shown that mutual dependence has a
positive effect on value creation (Blankenburg/Eriksson/Johanson 1999).

As has been pointed out, the progress of the processes of building
social capital and new knowledge depends on the existence of certain
preconditions. If these are not existent, the processes will never
start. If they change to be less conducive, the processes may slow down
or come to an end. Therefore these processes are not deterministic in
nature. But even if they presumably are partially unplanned, they can to
some extent be managed, for example by improving on the motivation. It
should also be realized, that not only are these processes at least
partially unplanned, they are more or less continuously ongoing, at
least whenever the partners interact.

There may be several opportunity effects following from
relationship commitment. Most important is a shared social and
intellectual capital, that is, new knowledge. Both should be regarded as
valuable assets. The former is important as a foundation for potential
future efforts to continue to build new or exploit existing, by the
partners created, knowledge. We are talking of an alternative cost above
what is usually implied by "switching costs". If the new
knowledge can be patented and the partners agree to selling a license,
may be they can appropriate the benefit. If not, they may be forced to
continue to cooperate to appropriate the benefit. Everything equal,
there should be an incentive to continue cooperating if the cooperation
has implied favourable consequences to both partners.

There may also exist material linkages as an effect of the
cooperation. If for example, for efficiency reasons, the two partners
have re-allocated their research resources as to benefit from scale and
specialization the interdependence may be extremely strong. Finally,
assuming that both the two companies involved and the individuals
performing the joint or collaborative activities, are always looking for
still further opportunities to improve, there is a probability that some
of these will be made use of.

Relationship Commitment and Opportunity Development

"An important aspect of experiential knowledge is that it
provides the framework for perceiving and formulating opportunities.
(Johanson and Vahlne 1977, p. 28) This implies that experiential
knowledge gives absorptive capacity (Cohen and Levinthal 1990), which is
ability to assimilate, evaluate and interpret new knowledge.

Kirzner (1973) provided a foundation for research about
opportunities. In his theory entrepreneurial discovery of market
opportunities has a central role. He assumes that market actors are
ignorant and makes a distinction between sheer or unknown ignorance and
known ignorance. While known ignorance and search in order to reduce
ignorance has been critical in earlier thinking on opportunity
recognition he places attention on unknown ignorance and the discovery
of the hitherto unknown (Kirzner 1997, Johanson/Johanson 2006). Although
he stresses the role of market experience in the market process he sees
discovery of opportunities primarily as a result of a natural alertness,
a preparedness to become surprised. This implies that opportunity
recognition rather is associated with ongoing business activities than
with specific opportunity seeking activities, a view which seems to
underlie March's (1991) distinction between exploitation and
exploration.

From a different theoretical point of view, Denrell, Fang and
Winther (2003) recently analyzed the economics of strategic opportunity
and found much like Kirzner that such opportunities are likely to be the
result of a serendipitous strategy process characterized by effort and
luck combined with alertness and flexibility. Their analysis focused on
the resource base of the firm and an interesting normative implication
of the analysis is that the relation between the idiosyncratic resources
of the firm and the resources outside are critical in opportunity
development since the firm has privileged information about the
existence of the internal resources. This can be compared with the
assumed need for both firm experience and market experience in the IP
model (Gelbuda/Starkus/Zidonis/Tamasevicius 2003). The similarity is not
surprising since both the resource based view and the IP model are based
on Penrose (1959). Heterogeneity of resources is a basic assumption in
both.

Based on Kirzner and Shane (2000) investigated the role of prior
knowledge and found that it seems to have a stronger impact on
opportunity recognition than special attributes of the individuals
because it makes them better at discovering certain opportunities than
others. His findings suggest that "potential entrepreneurs should
look to discover opportunities in what they know rather than in what is
popular with other entrepreneurs" (Shane 2000, p. 467). A
conclusion from his study with relevance for our purpose is "that
efforts to centralize opportunity discovery will meet with
difficulty" (ibid. p. 467). Ardichvili, Cardozo and Ray (2003)
summarized Shane's findings stating that three major dimensions of
prior knowledge are important. They are "prior knowledge of
markets, prior knowledge of ways to serve markets, and prior knowledge
of customer problems" (p. 114).

This leads us to the relation between commitment and opportunity
development. We have discussed how mutual commitment to relationships
evolves through interaction between the relationship partners; a process
in which they build knowledge about each other. It seems almost
impossible to avoid the conclusion that opportunities are likely to
develop as a consequence of the privileged knowledge the partners create
through interaction with each other. There they see and can develop
business opportunities, which others cannot see and develop. In
interaction they may even be able to create new business opportunities.
This development process is, we posit, of the same nature as the process
of the IP model and of relationship development. It is basically a
matter of interrelated processes of knowledge development about and
commitment to an opportunity idea. It may be unilateral when the firm
learns about the other firm's needs, technology, market and network
thereby creating an opportunity. It may as well be bilateral when the
two firms interact thereby creating an opportunity. This opportunity
development may even be a multilateral development process to which
several parties become successively more committed. It seems also likely
that, in such multilateral opportunity development processes, firms that
are connected to the initial partners will have the greatest chances to
become involved. Against this background we find that the importance
attached to serendipity (Denrell/Fang/Winther 2003) and alertness
(Kirzner 1973) is exaggerated. Moreover, since we consider these
processes as interactive and gradual we find that it is meaningless to
make a distinction between recognition and development (Ardichvili/
Cardozo/Ray 2003). There is an interactive and gradually increasing
commitment to a gradual concretization and realization of an opportunity
idea.

The development of a relationship with a partner in a foreign
market also gives the firm some access to the network knowledge of the
market (Kogut/Shan/Walker 1993). In this way the firm may be able to
develop new opportunities involving other firms in that network with
different capabilities and needs. In principle, we can expect the same
opportunity development process as in the earlier paragraph occur
although involving several firms with privileged information about each
other's resources and competencies.

We find that research about opportunities and network relationship
strongly supports the expectation that commitment has a positive effect
on opportunity development and hence on internationalization. We
summarize the discussion in two propositions:

Proposition 1. Opportunity development in a country market is
positively related to mutual relationship commitment with firms in the
market.

Proposition 2. Opportunity development in a country market is
positively related to the partner firms' network embeddedness in
the market.

Concluding Comments

Having concluded that the establishment chain is not the model, it
is easy to claim that we have no definite opinion about the exact shape
of the path of internationalization. Our discussion of commitment and
opportunity development and the important role of serendipity clearly
demonstrate that it is not possible to say more than that some paths of
internationalization are more likely than others. We believe though,
that if the process of increasing knowledge and commitment in the focal
firm and its partners on the foreign market has evolved successfully,
"the next step" will be characterized by larger investments
and consequently higher levels of control and risks. But the opposite
might occur as is evident in any relationship: mutual commitment has not
increased or joint learning has demonstrated that there is no
opportunity to exploit. So, we claim our model is not deterministic.

We strongly believe that learning and commitment building are
important ingredients in the business process. Postulating a drive to
develop the business of one's employer, or at least the
engineer's wish to improve the efficiency of a particular technical
solution used by the customer, learning and commitment building are
steps in this direction. Clearly, learning then includes the discovery
or construction of opportunities (Berger/Luckmann 1966).

In our 1977 article, it is clear that learning and commitment
building was important as uncertainty reducing measures. Here we have
changed focus from uncertainty reduction to opportunity development, but
the model is the same. Learning and commitment building is more about
discovering or constructing opportunities for improving on the business.
In Nahapiet and Ghoshal's (1998) words: "The concept (social
capital, our remark), therefore, is central to the understanding of
institutional dynamics, innovation and value creation." Or with
Morgan and Hunt (1994): "Therefore, when both commitment and
trust--not just one or the other--are present, they produce outcomes
that promote efficiency, productivity and effectiveness."

As we now see it, the incremental internationalization process is
about exploiting the opportunities identified at the moment. It could
well be that for various reasons, the opportunities identified at a
particular point in time are strongly dependent on the prevailing stock
of knowledge and commitment, exactly as our model explains. It does
imply, that opportunities explored and exploited are marginal in
relation to what the company is already doing (cf. the concept of
problemistic search, Cyert and March 1963). That is incrementalism.

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Johanson, J./Vahlne J.-E., The Internationalization Process of the
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Kogut, B./Shan, W./Walker, G., Knowledge in the Network and the
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